London’s housing crisis is arguably the greatest challenge facing the capital. It touches the lives of almost every Londoner. Yet, our housing system is failing to meet need – destabilising Londoners’ lives, placing pressure on public services and undermining London’s economic prosperity.

Political parties and sectors across the capital agree that something must be done. However, despite years of concerted effort, the crisis is worse than ever.

Our latest report provides a new, comprehensive response to London’s housing crisis: one that both addresses barriers to building new homes, while tackling the market failures that prevent existing housing supply from meeting Londoners’ needs.

London’s housing crisis continues to escalate

Over the past two decades, the extent to which London’s housing system meets Londoners needs has worsened on almost every metric.

This is a national crisis, not a regional challenge, and is harming lives and livelihoods both within and outside the M25. London’s housing issues are driving people out of the inner city, stretching public services, undermining the capital’s productivity and therefore slowing the UK economy.

Looking beyond bricks and mortar

There is broad consensus that this crisis is rooted in insufficient new housing supply. This is grounded in robust evidence which shows house price inflation has been caused by shocks to effective demand, combined with a housing delivery system that’s too restrictive and unresponsive.

But this can encourage a reductive framing: that London no longer has enough homes to go round.

Building more homes is non-negotiable. However, focussing only on housing delivery can obscure other factors which shape the crisis – who benefits from London’s housing supply, and who’s housing needs are left unmet.

Housebuilding influences affordability in the long run

If London’s housing stock had grown by an additional 1% annually since 2002, house prices would be around a third lower, and affordability would be more in line with the rest of the country.

But this would have required London to build more than twice as many houses every year for the past two decades – equivalent to adding the entire housing stock of Birmingham twice over.

This means meaningfully reducing housing costs would require very large volumes of housebuilding, sustained over decades rather than years.

But inadequate supply doesn’t fully explain London’s crisis of housing need

Building more homes is vital – but is only part of the reason housing need in London has worsened so dramatically since the 2000s.

When we look at trends in housing availability in London over the last twenty years, a more complex picture emerges:

• London has roughly the same number of homes per 1,000 people in 2024 as in 2002, despite London’s population rising by around a third.
• Average floorspace per person rose by almost 30% between 2004 and 2023.

But a stable supply of homes per person and more overall floorspace have been unequally distributed amongst Londoners.

Increased floorspace has accrued disproportionately to higher-income owner-occupiers. As such, despite London having more housing available per person than twenty years ago, housing inequality has widened rather than narrowed.

This does not mean London’s housing supply growth since 2002 has been ‘sufficient’.

But it does show the problem cannot just be understood as a simple shortage in the number of homes relative to the number of people who need them.

Factors affecting the way housing supply is used, allocated and accessed are therefore key to understanding the current crisis.

London has experienced a deepening crisis of housing distribution as much as one of supply. 

A ‘winner-takes-all’ housing market

While chronic under-supply remains a fundamental driver of unaffordability, how stock is distributed is not only determined by overall availability.

Ensuring our housing system meets Londoners’ needs depends not just on how many homes there are, but who can access them. This is shaped by:

• The tenure mix
• How the tax system treats housing
• Credit and mortgage lending
• Investment behaviours
• Income and wealth distribution

Changes in these factors influence who benefits from London’s housing system. They help explain why meeting housing needs has worsened, even though there are roughly as many homes per person in the capital as there were twenty years ago.

What does this mean for how we deal with London’s housing crisis?

None of this reduces the importance of building more homes. But efforts to increase London’s housing supply to date have not achieved the goal of better meeting the needs of all Londoners.

This means expanding supply is a necessary, but far from sufficient response. We must give much more attention to tenure mix, and to demand-side factors.

Centre for London has argued that housing policy for London should seek to achieve three goals:

• Expand social and affordable housing
• Address demand-side factors which drive inequalities in our housing market
• Make it easier and cheaper to build in London

Our three-part package for reforms

We argue for a three-pronged approach to the housing crisis, one which seeks to:

1. Increase the number of social and affordable rented homes, by radically expanding the capacity of local authorities and housing associations to deliver and acquire homes for social and affordable rent. 

The number of social and affordable homes in London has fallen by 20% per 1,000 people. This is fundamental to understanding why housing need in the city is more poorly met than in 2002, despite having the same number of homes per head overall.

Historic numbers of households on waiting lists for social housing, escalating use of temporary accommodation and record numbers of rough sleepers are clear indicators that Londoners cannot access the ‘right’ tenures. This has an important policy implication: adding units in the ‘wrong’ tenure will not relieve need where it is greatest.

However, London’s social housing sector has struggled to maintain, let alone expand, the levels of social and affordable housing in the city.

This is because the current financing model to deliver affordable homes through cross-subsidy and varying levels of grant funding is structurally fragile. This model is no longer fit for purpose, particularly when both viability and public finances are tight.

To enable the significant expansion of social and affordable stock London needs, we recommend a new settlement for affordable housing in the capital, built around:

• A bigger social and affordable homes programme – backed by an extra £912m a year, funded by local and city government, through a progressive Proportional Property Tax – to deliver 106,000 social and affordable homes over the next decade, with greater local control and more alignment with the city’s housing needs and delivery costs.
• Greater freedom to target funding where housing need is greatest, including the ability to finance the supply of family-sized and specialist homes.
• Robust, reliable counter-cyclical routes for the social sector to acquire homes so that acquisition can scale up quickly when the private market slows.
• A resilient long-term financial foundation for councils and housing associations through a Greater London Housing Fund that enables councils and providers to sustain delivery, maintenance, upgrades and investment across the whole market cycle.
• A new, municipal Build-to-Rent model that delivers good quality, additional and affordable homes at intermediate rents, to meaningfully expand options for Londoners priced out of secure home.

2. Address demand-side factors which accelerate price inflation as well as drive inequalities and inefficiencies in the circulation and distribution of housing stock.

The availability of dwelling space in London has increased substantially over the last twenty years. But these gains have been unevenly distributed, accruing almost exclusively to affluent owner-occupiers.

These widening inequalities highlight that London has experienced a crisis of housing distribution as much as one of supply, driven by demand-side factors.

Therefore, to address the ways in which demand-side factors influence housing outcomes, and to promote a more efficient and equitable housing market, we make the following recommendations:

• Reform property taxation through a fairer and less distortive partially devolved Proportional Property Tax, scrapping Council Tax and removing Stamp Duty on movers to release an extra 79,000 homes a year, while raising funds for reinvestment in social and affordable housing.
• Curb investment demand in parts of the market where it pushes up prices without reliably increasing supply, while channelling investment towards genuinely additional homes.
• Create practical pathways for better use and circulation of existing homes, including a London-wide ‘Help to Move’ scheme to help households move into homes that better match their needs.
• Introduce a new ‘Right to Sell’ offer that enables homeowners to unlock equity to improve the liveability of their homes and fund at-home care while creating a route for councils to acquire homes over time.
• Give councils stronger tools to tackle the most dysfunctional parts of local housing markets, including routes to acquire long‑term empty homes and properties linked to criminal landlords, for conversion to social and affordable rent.

3. Accelerate private housing delivery and ensure long-run price stability by making it cheaper and easier to build in London.

The evidence is clear that growth in London’s housing supply is fundamental to affordability.

However, even in recent years, when London’s housing delivery was at its highest, new supply has been far below that needed to stabilise house prices.

The recent collapse in housing delivery makes this issue even more urgent, with 2025 seeing the lowest number of housing starts in over a decade.

To tackle barriers and blockers to private housing delivery in London and ensure the scale of market supply needed for long-run price stability, we make the following recommendations:

• Make the planning system more predictable and less risky, with a clearer, more rules‑based approach so delivery is less dependent on slow, uncertain negotiations.
• Unlock more small and medium‑sized sites and support SME builders, to support ‘gentle density’ and ensure delivery is not overly dependent on a narrow set of large schemes and developers.
• Clarify and streamline building standards and compliance processes, maintaining quality while reducing avoidable uncertainty and delay.
• Align planning with the realities of housing finance, so policy expectations, infrastructure contributions, and delivery monitoring are transparent and investable.
• Create a simpler, clearer approach to developer contributions towards affordable housing and infrastructure, with a system that is predictable and workable across boroughs and market cycles.
• Ensure any new first-time buyer support scheme is time-limited, tightly-targeted, and partly developer-funded, and is focused on additionality.

London can build more homes, and it must. But if housing policy only focuses on increasing headline supply numbers and beating delivery targets, we risk missing the real problem: a housing system which is not delivering enough homes overall and has gotten much worse at ensuring the homes we already have are meeting the needs of Londoners.

This report therefore reframes the problem and presents a threefold solution: radically strengthening social and affordable renting, taking bold new steps to tackle the demand-side problems that inflate prices and entrench housing inequality, and making it easier to build at the scale and pace needed to deliver the homes London needs.